Life Insurance Corporation of India (LIC)’s Q3 reported a standalone net profit of Rs 6,334.2 crore in Q3FY23, up 27x y-o-y. This is a result of the transfer of Rs 5,670 crore from the non-par segment to shareholders’s accounts (related to accretion on available solvency margin). For 9MFY23, PAT grew 13.7x y-o-y to Rs 22,970 crore.
Annualised premium equivalent (APE) came in at Rs 12,320 crore in Q3FY23. Value-of-new-business (VNB) declined 21% y-o-y to Rs 1,800 crore as VNB margin moderated by 60bp q-o-q to 14.6% in Q3FY23.
The individual/group business constituted 62%/38% of APE, respectively, in 9MFY23. Within the individual business, the share of PAR products remained stable at 91%. In terms of new business premiums (NBP), the share of PAR products was lower at 66%. Annuity and ULIPs constituted the bulk of the residual with 24% and 7%. We expect the momentum to sustain in the medium term, led by incremental focus and introduction of new products.
Also read: Nykaa Q3 results: Net profit falls 68% on-year to Rs 9.2 crore as expenses jump faster than revenue
The sequential decline in VNB margin was a result of higher growth in the ULIP segment and re-pricing in the annuity products. Margin in the individual par segment improved to 11% from 10.6% in 1HFY23, while the same for non-par segment moderated to 63.6% from 68.7% in 1HFY23. Within the group segment, the margin moderated to 12.3% in 9MFY23. We now expect LICI to deliver a 15% CAGR in APE over FY23-25, thus enabling a 21% VNB CAGR. However, we expect operating RoEV to remain modest at 10.4%, given its lower margin profile than private peers.
LIC reported a 15% y-o-y growth in net premium, led by a 27%/6% growth in the new/renewal business. Total NBP grew 27% y-o-y to Rs 51,800 crore in Q3FY23, primarily led by 39% y-o-y growth in the group segment, while individual NBP reported a muted growth of 2% y-o-y. On an NBP basis, the share of PAR products moderated q-o-q to 66.4%. Term products contribute only 0.4%. Sales (Individual NBP) in the banca channel grew 48% y-o-y to Rs 1,360 crore in 9MFY23. This channel now contributes 3.5% of overall sales vs. 2.6% in 9MFY22. Incremental focus and a wider product offering will continue to drive higher sales from this channel.
Growth in agency channel was modest at 8% y-o-y to Rs 37,300 crore. However, LIC is continuously training the agents to sell non-par products. The persistency ratio saw mixed trends, with improvement in select cohorts. The impact of proposed changes due to tax treatment on maturity receipts stands minimal at 1.8% of APE. LIC has launched six new products in the non-par segments over 9MFY23 to increase the mix of such products.
LIC is witnessing an increase in the mix of business by Banca and other channels. LIC will continue to scale up these channels. Within the non-par segment, ULIP business has grown at a higher pace.
LICI has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments. However, changing gears for such a vast organisation requires a superior and a well-thought out execution plan.